Cutting into cylinder
Here's one way I would approach it: 


Select the faces to create the indentation, and Inset with tweak enabled. I while holding Ctrl
. (If desired,
you may change you transform orientaion to normal,
and rotate the faces to suit your object better.)
Crease the edges that border the hole with
Shift+E
Bevel the creased edges with Ctrl+B




Final result: